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Hedge fund managers record modest returns as coronavirus concerns escalate

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The Eurekahedge Hedge Fund Index gained 0.17 per cent in January, outperforming the underlying equity market as represented by the MSCI ACWI (Local), which lost 0.90 per cent over the same period.

Equity markets started the month on a positive note, supported by the de-escalation of the tension in the Middle East, and the signing of the US-China phase-one trade deal. The S&P 500 and the tech-heavy NASDAQ returned 1.97 per cent and 2.29 per cent respectively for the week ending January 17.

However, market sentiment shifted quickly towards the end of the month, following the coronavirus outbreak in China. Investors feared that the epidemic, which draws parallel to the SARS outbreak in 2003 might significantly weigh on the global economic outlook.

The Shenzhen and Shanghai benchmarks were down 8.45 per cent and 7.72 per cent on February 3, after the onshore markets reopened following the Chinese New Year holiday. The two market benchmarks partially recouped their losses over the following few days thanks to the liquidity injection introduced by the PBOC, as well as the tariff reduction on US imports.

Over in Europe, the FTSE 100 ended January down 3.40 per cent, underperforming other European equity markets as strong British pound weighed on UK equities.

Returns were mixed across geographic mandates in January. Despite the weak performance of the equity markets in the region, fund managers focusing on Asia ex-Japan were up 1.29 per cent, outperforming their North American and European peers who were down 0.30 per cent and 0.24 per cent, respectively.

Japanese hedge funds lost 2.00 per cent over the month of January, underperforming their regional peers. Across strategies, CTA/managed futures, fixed income and distressed debt fund managers were up 0.76 per cent, 0.74 per cent, and 0.61 per cent respectively throughout the month.
Roughly 58.7 per cent of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in January, and 37.6 per cent of the hedge fund managers in the database were able to end 2019 with double-digit returns.

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